The President last week was challenged by Congress to be specific in its ‘Drone Policy’ and other military permissible actions on US soil. Through Attorney General Eric Holder, he admitted it was ‘inappropriate’ and after Senator Rand Paul’s 13 hour filibuster of CIA Director nominee John Brennan, admitted in a letter the next day, “It has come to my attention that you have now asked an additional question: ‘Does the President have the authority to use a weaponized drone to kill an American not engaged in combat on American soil?’ The answer to that question is no.”
Was the President’s answer adequate enough and by what authority is that ‘NO’ tied to?
Senator Paul framed the issue in the first hour of the filibuster, “If there’s a gentleman or a woman with a grenade launcher attacking our buildings or our Capitol, we use lethal force. You don’t get due process if you’re involved with actively attacking us, our soldiers or our government. You don’t get due process if you’re overseas in a battle shooting at our soldiers. But that’s not what we’re talking about. The Wall Street Journal reported and said that the bulk of the drone attacks are signature attacks. They don’t even know the name of the person. A line or a caravan is going from a place where we think there are bad people to a place where we think they might commit harm and we kill the caravan, not the person. Is that the standard that we will now use in America?”
“I will speak today until the President responds and says no, we won’t kill Americans in cafes; no, we won’t kill you at home in your bed at night; no, we won’t drop bombs on restaurants. Is that so hard?”
Senator Paul’s response to AG Holder’s letter the day after the filibuster was ‘Hooray!’ as he felt that those who staged the filibuster received the answer they were looking for and the American people are better off in hearing it. But while the Administration was dragged from ‘inappropriate’ to ‘No’, and there may even be an implied constitutional principle rather than arbitrary power that makes that decision, it is vague at best.
“Having unlimited power; uncontrolled or unrestricted by law; despotic; tyrannical: an arbitrary government.”
John Locke, a seventeenth century philosopher that some refer to as the ‘Father of Classical Liberalism’ who’s ideas the founding era fathers called upon in creating the US Constitution said, “This freedom from absolute, arbitrary power, is so necessary to, and closely joined with a man’s preservation, that he cannot part with it”. The mortal sin of government is arbitrary power, while a government restrained by law (constitution) will survive.
This has been the history of the United States, even while constitutional boundaries have been slowly broken down and powers arbitrarily assumed by Washington have become more prevalent, the ‘SS America’ though her belly full with assumed authority in Washington still navigates and protects its precious cargo and passengers to some degree. But what transpired last week is very important in understanding the condition and restoration needed to right this Republic.
While the week started out very interesting as Washington rarely does, ‘aired its dirty laundry’ it became even more so as Senators John McCain and Lindsay Graham criticized Senator Paul and his colleagues that staged the filibuster the next morning. Senator McCain called some of Paul’s comments ‘Ridiculous’ and said, “So we’ve done a, I think, a disservice to a lot Americans by making them believe that somehow they’re in danger from their government They’re not. But we are in danger. We are in danger from a dedicated, longstanding, easily replaceable leadership enemy that is hellbent on our destruction. And this leads us to having to do things that perhaps we haven’t had to do in other more conventional wars.”
Senator Graham added a rebuke and challenge to why now, “We should be talking about it. I welcome a reasoned discussion. But to my Republican colleagues, I don’t remember any of you coming down here suggesting that President Bush was going to kill anybody with a drone.”
To help Senator Graham’s memory, there were those in Congress (not many GOP) that criticized the Patriot Act and violations of FISA (Foreign Intelligence Surveillance Act) in unwarranted monitoring of emails and cell phone calls as there was a great public shift in tolerance at the time to give up personal freedoms for security. Many of the legislative and executive actions back then have paved the way for more aggressive legislation that could possibly violate state non delegated power and personal liberties like due process today. NDAA 2012 is a good example of that as around 20 states are in the process of creating resolutions and laws to ‘nullify’ it.
Senator Rand’s response to McCain and Graham was, “They are on the wrong side of history on this one. They believe that war is everywhere and there kind of with the President who believes there’s no geographic limitations. They also say that the laws of war apply, what the laws of war apply means is that you don’t get Due Process and I can understand that in a battlefield, you don’t read Miranda Rights, if you are shooting at me, we kill you. But they say America’s a battlefield and that’s a huge mistake. If we bring what is in effect Marshall Law to America, Americans will be really upset. These are the same people (McCain and Graham) that want to detain American citizens indefinitely without a trial.”
While to the ‘untrained eye’ these last few days may seem like a lot to do about nothing and they may automatically tune out politics or just can’t see drone strikes or other military actions on American soil. But consider, in ‘broad daylight’ we have an administration that can only muster up ‘inappropriate’ to describe the act of the federal government killing Americans without due process and many in Congress berating the questioners. If this is the response in public, what could happen in the ‘Fog of War’? Isn’t it important to tie these arbitrary powers to law and a system of authorization?
While filibusters are unique in that they happen infrequently, the filibuster by Senator Rand Paul and others was unique in that it called for less federal military intervention which we haven’t heard from in more than six decades. Interesting, a filibuster in 1917 by Republicans to kill pro-intervention into World War 1 was defeated by senate Democrats through cloture at the urging of President Woodrow Wilson.
Up until the early 1950s, many conservatives were non-interventionists and the ‘Old Right’ was committed to restraining executive powers until the late 1960s when neoconservatives began to endorse interventionism in opposition to the USSR.
The Right were generally dragged kicking and screaming into both world wars and as McCain et al demonstrated this past week, neoconservatives are having a very difficult time justifying the precious lives of our children, the destruction of important military assets and the sacrifice of individual liberty in a futile effort to buy off world support through aid and occupation and the pretense of security at home through paternalism.
As Ecclesiastes 1.9 says, “There’s nothing new under the sun.” What has been done is being done and whether it’s Conservative or Progressive ideology that you think is ‘new’, you are mistaken my friend.
But there is a ‘Plumbline’, a measuring stick that allows these old ideas to be rehashed and it protects liberty in the process. It’s the US Constitution, which says ‘No’ to federal power except for which has been specifically delegated and ‘Yes’ to the states for all other non delegated power.
James Madison writing in Federalist Papers 10 warned against the loss of personal freedoms in a ‘centralized government’, “A pure democracy can admit no cure for the mischiefs of faction(s) (special interests).. Hence it is, that democracies have ever been found incompatible with personal security or the rights of property; and have, in general, been as short in their lives as they have been violent in their deaths”.
Missing from the President’s and AG Holder’s response, as well as the media coverage and the critics of the filibuster is the US Constitution and a discussion of the limits of government power under it. Washington as we know it HAS TO live under arbitrary power to consolidate more power and the money that goes with it. For Individual Liberty to prevail and a healthy society as a result, constitutional authority must be reestablished.
To be blunt, it is the ‘Rand Pauls’ and Ron Wydens (sole Democratic Senator to speak at filibuster) whose job it is to dismantle (not change) Washington and it is the state legislatures around the nation whose job it is to resurrect State Authority in order to bring back Constitutional alignment.
Christopher M. Mahon, Editor
Christopher Mahon is the Editor of Ambidextrous Civic Discourse, ‘Where the Right and Left meet’; a place where you can find information about economics, philosophical and political issues that challenge those on the ‘right’ or the ‘left’ on what works best in society. At ACD you can find articles, essays and book classics on the subjects mentioned above that contrast differences like Keynesian vs. Classical Economics or the function of government – Negative vs. Positive Liberty. Please peruse our Library and videos. Chris has a Masters in Accounting and Financial Management. Learn more at – www.ambidextrouscivicdiscourse.com
As the President and Congress face Sequestration, an imposed cut on spending increases of roughly 2% which would amount to $42 billion in FY 2013 according to the CBO (Congressional Budget Office). Most would agree that cutting 2% out of their home budget is no fun, as evenings out and other discretionary spending would suffer but it wouldn’t warrant the reactions coming from the Media, the President and other politicians in Washington.
Some have argued against federal spending cuts and would say the more important issue is a ‘balanced budget’ and that raising taxes would be the better way to accomplish this, as you can pinpoint those taxes toward the wealthier class of citizens. Economists like Paul Krugman of the NYTimes go even further by inferring that private and government spending in the economy make no difference and that he could argue that money in government hands can be ‘invested’ more fairly. Free market believers on the other hand would make the point that Laissez-faire “an economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression,” is more efficient, less fragile and as a result of competitive markets allows for success, failure and the reallocation of resources to their most productive positions.
Today, if you are in the ‘Middle Class’ you might be expecting something from Washington as both parties in the 2012 election out did themselves in making promises to this class of people.
In two recent studies by Harvard Professors, they show that levels of public spending affects private markets and the economy in a negative way, (maybe Harvard Economic chairman Greg Mankiw is making some influence in the pro-Keynesian college curriculum). In the studies ”Large changes in ﬁscal policy: taxes versus spending“, Alberto Alesina and Silvia Ardagna and “Do Powerful Politicians Cause Corporate Downsizing?” Lauren Cohen, Joshua Coval, and Christopher Malloy (all of Harvard Business School), the ‘public versus private economy’ is taken into consideration on how they perform and interact. In the ‘Large Changes’ study, they look at OECD countries (Organisation for Economic Co-operation and Development) from 1970-2007 and identified periods of austerity where government was slashed and periods when government grew in proportion to the private market. While there has been criticism of the study, the study supports the Classical Market (Laissez-faire) concept that less government intrusion leaves the private market to ‘self regulate’, while isolating failures (which become systemic in centralized/government dominated markets) and through competition, creative models result that are more efficient and tailored to consumers’ wants and needs. In the second study, they track politicians in the US Congress that become Chairpersons or influential leaders of their party and whether or not that affects the amount of federal spending that flows to their home state and the effects of that spending. The study finds that there’s an almost 50% increase in federal spending that flows to the home state of the Congressman and that the change in public:private ratio (increase in public) has a dramatic negative influence on the state’s private industries with layoffs and economic slow downs resulting many times. In the first study, when public spending has been cut, and there were some isolated incidences of initial slowdowns, vibrant growth has followed. The argument being made by the White House and some in Congress is that if you cut federal spending the ‘fragile US recovery’ will stall. Many believe this has already happened and that the opposite should prove true that if you cut federal spending, putting more money in the hands of the individual and the private market, and if Washington gives clear signals to the credit markets and private capital sitting on the sidelines that Washington will ‘stand down’, that sustainable recovery is more probable.
Over the last Eighty years, Washington has built an intricate ‘Welfare and Warfare’ system that provides regulation and subsidizes to almost every area of society through business, individual and foreign aid. “Government spending at the start of the 20th century was less than 7 percent of GDP. It vaulted to almost 30 percent of GDP by the end of World War I, and then settled down to 10 percent of GDP in the 1920s. In the 1930s spending doubled to 20 percent of GDP. Defense spending in World War II drove overall government spending over 50 percent of GDP before declining to 22 percent of GDP in the late 1940s. The 1950s began a steady spending increase to about 36 percent of GDP by 1982. In the 1990s and 2000s government spending stayed about constant at 33-35 percent of GDP, but in the aftermath of the Crash of 2008 spending has jogged up to 40 percent of GDP.” USGovernmentSpending.com
While many Conservatives have warned of a growing ‘Socialization’ of US society through federal domestic intervention into commerce, education, family and other areas of civilian life that in their view ‘robs personal freedoms’, Progressives have warned about a growing military complex as a result of protecting the US against terrorism abroad and more recently even domestically as we ‘hunt down’ homegrown terrorists. The US has been transformed from a predominantly ‘private society’ where most transactions happen without government intervention to a ‘mixed society’ where a considerable amount of daily transactions (direct and indirect) include government influence.
Washington has proved what the founding era fathers feared, that the nature of federal power and spending is to grow and that they can’t police themselves. There are only two likely outcomes:
One is given in this illustration by Stan Druckenmiller a former ‘well heeled’ Hedge Fund Manager, ”The bond market is the banker for the federal government. Imagine if you will, your banker comes to you and you’re making $40,000/yr and lends you money at zero interest – no cost. Later, after you’re in debt $5 million, they realize, ‘He’s making $40,000 and has $5 million in debt!’ Suddenly your interest rate goes to 16% and carrying cost goes through the roof. That’s what will happen to the US government over the next 10 years, and it will happen suddenly like Greece. Greece was in good shape in 2010.” The market eventually gets it’s revenge.
The second, is happening but slowly as several states for various reasons (anti-NDAA and Gun Control legislation for example) are standing up to federal power that the states believe violate constitutional authority and are reclaiming those powers to protect their citizens. As Lincoln era legislation was passed in the 1860s: National Banking Acts, Legal Tender, Morrill Grants (education) and railway acts (early corporate cronyism) intended to nationalize power for a greater purpose of the ‘American Experience’ which was followed years later by FDR New Deal federal expansion of power as mentioned earlier in the article, popular sentiment has started to change as Americans are looking for relief and protection from a capricious federal government that it is out of control.
After World War 1, Presidents Warren Harding and Calvin Coolidge were met in 1920 with one of the worst Depressions in history as prices fell almost 20% (Wholesale by more than 36%). Some blamed it on returning troops from the war, others on monetary policy as interest rates were almost doubled and even some blamed gold and the anticipation of inflation (Federal Reserve policies). Harding and Coolidge cut federal spending by more than 20%, considering government spending a burden on the private market, and the devastating depression of 1920 lasted approximately 18 months. Economists will point to the austerity cuts of the 1920s and Laissez-faire policies of Coolidge as the path to follow, while some instead will point to the aggressive spending of the New Deal era as the better solution for today. Keep in mind that the 1929 depression didn’t show ‘green shoots’ until 1937 and the stock market took 25 years to recover to its pre-crash levels.
The real question is more philosophical and goes to the core of Platonic and Hobbesian differences. Plato illustrated three classes of citizens in his Republic: A ‘Ruler’ class, ‘Warrior’ class and ‘Worker’ class. Washington today has become that Ruler class, while the courts and law enforcement could be the Warrior class and all others fall into the Worker class. Hobbes believed that ‘all men were created equal’ in the sense of potential and ability of each man to find life, liberty and to pursue happiness. In that philosophy our Declaration of Independence was forged and won, the US Constitution was built upon this principle that ‘men’ can find their way and through the voluntary and free association and exchange in the marketplace society is regulated and healthy, while government can play a small part in a negative position (stands down) to defend man’s property and individual liberties. These rights remain with man until man forfeits those rights when taking them from another. Which will we choose going forward?
Even if we took the advice of Coolidge and the studies mentioned above seriously and were able to make substantial cuts in federal spending and a robust recovery resulted; wouldn’t we find ourselves in jeopardy again as soon as the next crisis appears and the federal government steps in? In order to solve our spending problems we need to be fiscally responsible and we need to mend our Constitutional Fence.
Tell us what you think.
Christopher M. Mahon, Editor
A very interesting exchange on Foxnews Sunday with Chris Wallace as Karl Rove, one of the panelists is asked about recent comments from Talk Radio host Mark Levin who said, “He’s also up there with that stupid little third grade white board of his, with his fourth-grade writing style, talking about how they committed $30 million to Tea Party candidates. Bring on your little white board. We’re ready!”
Levin, like many other media critics, grassroots Republican Party groups like the Tea Party are still hurting from the devastating loss the party suffered in 2012 and who blame Rove in part with supporting nominees and a ‘runaway platform’ after the convention last August that many states, local districts and the grassroots like the Tea Party didn’t support.
Karl Rove, a ‘Republican Strategist’ has been involved with the political process since 1968 and has worked with mostly ‘modern traditional’ Republican candidates whose policies generally support a large military footprint and supply side business incentives. Rove has played a part in both George H and George W Bush campaigns and other campaigns like Ronald Reagan’s.
Rove has been in the news lately when it was announced earlier this year that he was starting up the Conservative Victory Project, which is described on Wikipedia as, “the prominent Republican political activist, and the super-PAC American Crossroads. Its purpose was to support “electable” conservative political candidates for political office in the United States. The effort was prompted by embarrassing failures of several Tea Party and independent conservative candidates in the elections of 2012. The project has been strongly criticized by some other conservative activists.”
Rove goes on to make the point later in the Foxnews show, “Right. And our (Conservative Victory Project) object is, to avoid having stupid candidates who can’t win general elections, who are undisciplined, can’t raise money, aren’t putting together the support necessary to win a general election campaign, because this money is too difficult to raise to be spending it on behalf of candidates who have little chance of winning in a general election.” Wallace then goes on to ask this question to Bob Woodward, “Bob, what does it say about the Republican Party when you have Karl Rove stepping in there to say we have got to try to police those Republican primary voters — I mean, it’s part of the process, I’m not saying there is anything wrong with that, but they are trying to police who Republican primary voters are going to pick to go up against Democrats (interrupted).. and let me just finish the question. And, when you have Marco Rubio, who is pretty conservative and a Tea Party favorite giving the Republican response and the Tea Party thinks they have to have somebody else to give a response to the response?” Woodward then responds, “My last book is going to be called “Some People Never Go Away,” and Karl is going to get his own chapter (LAUGHTER) because he never goes away.”
Woodward goes on to point out, “I think the problem in the Republican Party is really not money. I think they’ve got lots of it. I think it is – theory of the case, why are we here, what is our message, how to connect to the real world and this idea about 30 million here, we’re going to do that, I think is the wrong track…you’re going to set yourself up as a kind of politburo, vetting these candidates …I mean the whole theory of Republicanism is to let the local state or a district decide.”
Is Karl Rove or other party advocates needed to sift out ‘unelectable’ candidates or can that be done through the ‘primary marketplace’ (as Rand Paul suggested) or from the ground up through local and district support for candidates and issues? If Rove is a problem is he merely a symptom of a greater problem that lies at the feet of the Republican National Committee (RNC)?
Many have tried to pin down a reason for the GOP’s victory in the 2010 election results: An economy in crisis, a rejection of Obama and the Tea Party and other grassroots movements that were calling for ‘limited government’ and ‘fiscal responsibility’. While incumbents were fair game, it was generally a big year for Republicans. Among record turnout, the GOP saw increased numbers in most categories and young people in particular.
The college students that were turning out for Tea Party and other grassroots movements that centered on ‘Liberty’, ‘Limited Government’ and the Constitution seemed to strike a chord with the message. But then they saw their candidate Ron Paul vilified and marginalized in both the news media and the debates. The issues that were important to them – limiting federal power, free markets, keeping federal government out of social issues and a ‘constitutional compass’ weren’t taken seriously. But they were told, even though their candidate was battered and bruised all was not for nothing as the Convention in August (2012) would show that they were heard loud and clear and that some of those issues would make it onto the RNC platform.
In ‘RNC Rule 12: The Death of The GOP?’ during the RNC Convention last year I wrote about the latest RNC rule change to control the national platform. “The RNC Rule 12 that was enacted yesterday gives the ability of the GOP establishment in Washington the power to change rules and regulations quickly to destabilize grassroots movements that have less funds and influence in order to centralize power and the platform. Tea Party-type fires will be extinguished way earlier and if you happen to be in a majority interest today, good luck when the majority changes tomorrow due to special interest winds – platform will follow favor and money. Any creative grassroots movement going forward unfortunately will occur outside the GOP brand.”
The history of the Republican Party starts in 1854. The history of the RNC starts in 1856, launched with the goal of equal representation throughout the states through one representative from each state. The idea was that through local and diverse representation the people would be heard and constitutional liberty would be protected and ideas and solutions would germinate locally and arrive in Washington to create a national platform. As years have passed that representation has changed and power has moved from the rural and urban locales to Washington, DC. Ironically, Woodward unlike some of the GOP panelists picked up on that.
If the Republican Party can solve their problem of representation and the irresistible urge to centralize power in Washington, maybe that can be reflected in their national platform that puts the authority of the Constitution first in governing under the delegated powers and protecting the non delegated powers that were to remain in the states. Is the fate of the ‘Grand Ole Party’ the fate of a Nation?
Christopher Mahon, editor
We live in a time of furious federal legislation that assaults constitutional integrity that limits government power through the specific delegated (enumerated) powers that the states have granted to the Federal Government. Unfortunately like in the late 18th century and as we are finding out today, pragmatic attempts at solving socio-economic ills lead to attempts to violate these protections. If the lofty competitive universities of today and yesteryear teach anything, it’s that the ‘ends justify the means’ and as Plato mapped out in his Republic, there is an elite group that has been bred, taught and primed to lead and govern all men. They reside in Washington but power share through government-business relationships on Wall Street and other places that reinforce that power arrangement.
In the Virginia Legislature, January 23rd, 1799 addressing their concerns over the federal Alien and Sedition Acts of 1798 and its ambitious attempt to solve what the ‘Nationalists’ of their time perceived as an immigration problem, they passed law that violated state sovereignty for a ‘Greater Good’; and in Thomas Wood’s book, Nullification: How To Resist Federal Tyranny in the 21st Century’, and his quote below, tell me if this doesn’t sound like the recent battle that Arizona had through SB 1070 and where the Constitution speaks regarding state and federal powers or some of the federal legislation coming from Washington regarding NDAA, Gun and most recent Immigration legislation that contains ‘unpacked’ language that potentially violate ‘Due Process’ and other rights for expediency:
“If a suspicion that aliens are dangerous, constitutes the justification of that power exercised over them by Congress then a similar suspicion will justify the exercise of a similar power over natives (citizens); because there is nothing in the Constitution distinguishing between the power of a state to permit the residence of natives and aliens. It is, therefore, a right originally possessed, and never surrendered, by the respective states, and which is rendered dear and valuable to Virginia, because it is assailed through the bosom of the Constitution, and because her peculiar situation renders the easy admission of artisans and laborers an interest of vast importance. But this bill contains other features, still more alarming and dangerous. It dispenses with the trial by jury; it violates the judicial system; it confounds legislative, executive, and judicial powers; it punishes without trial; and it bestows upon the President despotic power over a numerous class of men. Are such measures consistent with our constitutional principles? And will an accumulation of power so extensive in the hands of the executive, over aliens, secure to natives (citizens) the blessings of republican liberty?”
This is a time that Edmund Burke would point to in his often quoted, “All it takes for evil to prevail is for good men to do nothing.” If you want to get involved, going to Washington is not necessary and in most cases nonproductive. Rather, find your local political party affiliation meeting or look for a social connection on FaceBook, Meetup, etc where you can join forces on issues that should concern you. The ‘Tenth Amendment Center’ has an excellent tracking page for different issues and great articles, please visit it and get informed on how you can help in your state. Many states are in different phases of drafting legislation to thwart federal overreach, so get up off the couch or from your well warmed chair at Starbucks and get involved. It’s time to stand up for your family, your community and your state to keep government powers diffused, competitive and effective in protecting (not granting) the rights of each individual.
The market itself, unencumbered by federal intervention and minimally by state and local government, in its free and voluntary social and economic associations and transactions that marginalizes the ‘bad actors’, is the best system we have to safeguard the liberty of each and every one of us, and is at the heart of what the founding era Patriots believed and created.
Christopher M. Mahon, Editor
While I’m not a professional fly fisherman, I have slept at a Holiday Inn Express. I’m obviously joking and appreciate Holiday Inn’s commercials. But I was on a trip last year with a couple of fly fishermen and I’ve been in a social gathering where the sport has been discussed.
What has stood out to me is the hypnotic stare and elevated excitement as the stories unfold of catching fish and the different techniques. The interesting thing is to hear about the fly lures they put at the end of their fishing rods depending upon the type of fish they are after. Some look like literal flies, while others like worms or mimic the environment where they hang out. You almost can’t see the hook hiding behind the design. Also they’ll tell you where to wade – ‘over by that rock’ or in ‘deeper current’ in determining ‘best location’ for different fish.
Politics is very much similar to this. The hypnotic stare and elevated conversations that can happen around a holiday table, bar or even a senior citizen centers as you and I give our opinions and expertise on what Washington needs to do and what the important issues are; which of course generally run along side our particular proclivities: Pro Life/Pro Choice, Education, Social Security, Entitlements, Social Issues, Defense, etc.
Both the national Republican and Democrat parties like professional fly fishermen also choose specific fly lures (issues) and look to wade in specific areas of our nation in order to find you and I and ‘hook’ us, drag us into their boat or box to be filet, gutted and cooked later on. OK enough word pictures, I’m hoping you’re following this.
Except for Defense and squabbles that arise between the states and the states and foreign entities in which the Federal Government takes on the role of agent, all the issues above were intended to be functions of the states/colonies and even more importantly the function of a free market. A central system becomes monolithic, fragile and resistant to ideas and change; and when (not if) failure results it is catastrophic. Decentralized systems (the states retaining most powers) on the other hand, allows for competitive models to social and economic problems, failure is actually beneficial as unproductive resources are reallocated and success is imitated. Also, democracy can exist in the lower levels of government as the potential for homogeneity and similar interests are more likely ‘closer to the ground’ than at ’40,000 ft in Washington’.
When you and I drool like a fish and leap for nationalizing social issues of banning drugs, homosexuality or economic issues of ‘tax the rich’, wealth redistribution, universal healthcare or promises of better government Social Security and Medicare we really are leaping for a disguised hook of central government control of our lives that will limit individual freedom and just like the mirage of the hook will never deliver the promises made. It’s the free market of voluntary association and exchange that best accomplishes the goals (proclivities) you seek. Even in the controversial areas of Drugs, Marriage and even Abortion (which I believe is murder at some point) should be decided at the state, local and personal levels as was the intent of the Constitution. The Constitution delegated very few powers to the federal government but the feds have usurped more power through our weakness in seeing our beliefs ‘nationalized’.
In the movie ‘Finding Nemo’ the warning was to watch out for the nets that the commercial fishermen lowered from their boats. But for some it was irresistible as they swam into captivity. You and I MUST resist the ‘captivity’ of more central power even if the mirage seems so real.
I think my new slogan for 2013 is, ‘Don’t Get Hooked!’, and if you are currently dangling from a GOP or Democrat party promise of Equality, Justice, World Peace or whatever your proclivity, I hope that you can set yourself free. This starts by understanding the ratifiers intent in the US Constitution and why a ‘runaway’ federal government is dangerous to Liberty.
Christopher M. Mahon
The shooting in Newtown, CA December 14th 2012 was heart breaking as families and a nation have been grieving.
Unfortunately, while many focus on the incident in consoling those who’ve lost so much and examining the security and whether procedures were followed correctly, others are using the ‘crisis’ as opportunity to push a polemic agenda of more (or less) government involvement.
As our country’s founders understood that the ‘natural process of Government was to grow’, this is particularly cogent when a ‘crisis’ occurs. But how do we as Individuals and citizens of municipalities, states and a Federal Government sleep at night knowing that we could be at the mercy of the next crisis which through well meaning public policies could further limit our freedoms for a ‘Common Good’?
While many understand that the Constitution was designed with two systems of government in mind, Federal and State powers, there is disagreement on what powers each possess. Does Federal trump State and if there is belief that the Federal or a State has ‘overstepped’ and abused it’s power as in the recent conflicts with ‘Obamacare’ or in Arizona’s battle with SB1070 on immigration, who or where is the governing body to make an impartial decision on which party is correct?
Thomas Woods writes in his book ‘Nullification: How To Resist Federal Tyranny in The 21st Century’, “When the Constitution was ratified, the people were assured that it established a government of limited powers (primarily related to foreign policy and the regulation of interstate commerce), that the states retained all powers not delegated to the new government, and that the federal government could exercise no additional powers without their consent, given in the form of constitutional amendments. This is not a peculiarly conservative or libertarian reading of the historical record. This is the historical record.”
Today, we see many States resisting what they perceive as Federal overreach in prescribing policies for social and economic ills through Washington. Almost thirty states have either said no to creating Insurance Exchanges or have taken a wait and see approach regarding ‘Patient Protection and Affordable Care Act (2010)’ (Obamacare) and just this week Michigan’s House voted unanimously to defend itself against NDAA 2012 which it deems unconstitutional regarding the commandeering of State assets. Add to that the Sheriff Initiative Act and other individual States acting through ‘assumed’ Nullification powers have decided on their own not to enforce certain Federal laws.
Washington and many in the media challenge the constitutional legitimacy of Nullification and it’s even more evil sister ‘Secession’. For the last eighty years the universities have taught that these issues were decided through Civil War and subsequent court precedent. However, Robert Natelson in his 2010 book, ‘The Original Constitution’ approaches the split powers of the Federal and State governments slightly different as he draws upon what the ‘Founders-era’ intents were and their understanding of law, reason and the dialogue of the state conventions that the ‘Ratifiers’ understood when signing the Constitution.
Natelson, brings out an important question that would help to define better the relationship of the States and Federal governments and the proper recourse when Federal power abuses the States as many have come to believe is happening today. While ‘Nullification’ is the buzz on twitter and other social networks, Natelson takes us through the Founders-era understanding of the Constitution and how the states defended their sovereign powers through ‘Article V Conventions’ which were different than a ‘Constitution Convention’; Article V allows for specific issues and text to be addressed while not jeopardizing the whole document. He points out, “To be sure, the question of whether there was an “American people as a whole”—or only the peoples of separate states—has been the subject of much debate. Some contend that the Constitution created merely a compact (contract) among the thirteen states—or, more precisely, a compact among thirteen separate political societies. According to this “compact theory,” each of those societies gave up certain aspects of sovereignty to the federal government, retaining the rest. Advocates of this theory point out that the states ratified through individual conventions. Some have employed the compact theory to argue that if the federal government breaks the terms of the contract by exceeding its powers, the states have the right to void (“nullify”) the offending federal actions or even secede from the union. Others argue that the Constitution was less an interstate compact than a popular grant—that is, a grant from the American people of certain powers to the new central government. Powers not given to the central government and already lodged in the respective state governments remained there. What was left was retained by the people. Advocates of this theory contend that ratification by state conventions was merely a concession to practicality, not to imply that states were the parties (or at least not the only parties) to the Constitution.”
As dark clouds of economic and social crisis’ gather, the threat of the abuse of Federal power looms but the silver lining in those clouds is that many States are becoming proactive in blocking what they perceive as harmful and unconstitutional Federal legislation through Nullification and Interposition which has historical precedent, but will the real war engage when we define the relationships of the States and Federal government as Mr. Natelson has suggested, through ‘Compact Theory or Direct Grant’?
Christopher M. Mahon, Editor
In an article in the Wall Street Journal, In European Crisis, Iceland Emerges as an Island of Recovery Charles Forelle describes an unlikely phenomena, a national recovery inspite of the EU crisis. But why isn’t the media covering it more and everyone talking about it?
“In 2008, Iceland was the first casualty of the financial crisis that has since primed the euro zone for another economic disaster: Greece is edging toward a cataclysmic exit from the euro, Spain is racked by a teetering banking system, and German politicians are squabbling over how to hold it all together. But Iceland is growing. Unemployment has eased. Emigration has slowed.”
The Iceland dilemma was well covered in 2008 as we witnessed bank runs and young people fleeing the country for other opportunities; but today the reverse is happening, the young are returning, businesses are humming and jobs are more plentiful. Now, don’t be mistaken, this is a ‘European style’ recovery where inflation is high and there’s still substantial debt costs, but it is a very positive scenario in a bleak region as Greece teeters on solvency while the EU caves to lending it more money and other nations like Spain are close behind.
“Iceland—with its own currency, its own central bank, its own monetary policy, its own decision-making and its own rules—had policy options that euro-zone nations can only fantasize about. Its successes provide a vivid lesson in what euro countries gave up when they joined the monetary union. And, perhaps, a taste of what might be possible should they leave.”
In some ways Iceland and Greece’s problems could be compared to California and other state hampered budgets in the US and bond defaults and bankruptcies at local levels. Where Iceland made a bold move to allow the banks ‘to fail’ and had its own currency (whether wise or not) to devalue, the reality is that it gave clear signals to investors and the market what its intentions were – less government intervention and the allowance for clearance of malinvestments and resources.
That rescue, in turn, weighed on the financial system. But unlike Ireland, for example, Iceland let its banks fail and made foreign creditors, not Icelandic taxpayers, largely responsible for covering losses.
Iceland also imposed draconian capital controls—anathema to the European Union doctrine of open financial borders—that have warded off the terrifying capital and credit flights that hit Greece, Ireland and Portugal, and now test Spain and Italy.
While Iceland is an unusual example of financial recovery of a nation and as their 320,000 citizens is a very small sampling to apply across broader populations, that’s just it; what works there may or may not work here or other places. Financial systems that are centralized are inherently vulnerable to monolithic elements of corruption, fragility and fatal failure. Failure of a city does not have the effect of a gigantic centralized structure, though tragic and harmful just the same. But competitive elements and options are open in a decentralized system that are closed off to a centralized one.
Finally, is the reason you won’t hear this success story on the nightly news, the Daily Show or Colbert because it exposes the real villain in our financial and social problems – government itself?
Policies and Philosophies like Keynesian Economics and Plato’s Utopia which elevate collectivism and government as the underpinning of social harmony grabs the attention of the powerful, while the importance of the Individual and that the ‘inequalities’ in society itself create opportunities for real social cooperation are discarded quickly as nonsense or fairy tales. The true ‘Romantics’ in US history were not the writers of a Constitution who designated limited power to the Federal government and those who followed in defending the restraint of centralized federal powers but instead the believers in a Utopian society and Nationalism, where through a benevolent government all are equal but none are free.
Christopher M. Mahon, Editor
Is Jamie Foxx a poet but he just don’t know it?
Apparently many on the ‘Right’ are taken back by Jamie Foxx’s prophetic irony on Soul Train last night. The State has supplanted Religion and the Individual him/herself as the answer to their problems. While the GOP points a finger to Democrat (Progressive) Income Redistribution, the four fingers of Social Engineering, Supply Side Stimulus, Military Adventurism and Monetary Easing are pointing back.
The GOP suffered a substantial loss this year, when considering the Obama administration’s past four years of economic and social planning failures (including Obamacare) it should have been a successful political year of not only winning the Presidency but the Senate as well and additional seats in the House. But instead of ‘soul searching’ and finding where there was ‘brush fires’ of enthusiasm, the GOP is doing what it chided the Democrats for doing after their losses to the Bush administration, “It’s not the explaining your message better, IT’S THE MESSAGE!”
What is interesting and telling is, while the Democratic Party’s local chapter meetings are stock full with young doe-eyed believers who are brain washed through the Universities and Celebrity endorsements that are ‘Coool’, the GOP meetings are thinning quickly as the well over sixty crowd dies off with few youth in their ranks. If the GOP did an honest assessment they would find the ‘brush fires’ of not only young but the aged as well in the Liberty movement that wants to see a true ‘beat back’ of federal power. They were disappointed in the party for the bank bailout in 2008, they dislike the overreach into the powers of the states by the GOP on social issues such as drugs, marriage and abortion (murder mostly state issue) and they are questioning the wisdom and apparent failure of the near 70 year ‘Neoconservative experiment’ in military expansion and US intervention that overreaches into the sovereignty of nations.
There is a prevalent lie going through both parties and it goes like this: “If you want to ‘Decriminalize’ Federal Drug Law you’re condoning Drugs” or “If you are not in favor of a Federal Law for ‘Equal Wages for Women (or substitute any class of people here)’ you’re against women (minorities) being paid equal wages”. This is a lie, whether it is expressed by the Left or the Right to support their particular proclivity: Abortion, Drug Prevention, Education, Poverty, etc. The best regulator of behavior and protecting against the ‘Bad actors’ is the marketplace itself and where deemed necessary government closer to the ‘ground’: family, community, municipalities and state governments that are exposed to competition and the free movement of private resources. Unfortunately the seeds of ‘Hamiltonian Nationalism’ have matured very well in both parties and the ‘Duopolistic’ political system in general.
James Madison in Federalist Papers #10 and #51 warned against the abuses of factions (Special Interests) but also explained why in a free market or through the colonies (states) and competitive markets they could be very useful. When Special Interests are centralized and managed through federal powers the unintended consequences are great and the freedoms lost are even greater.
A Left Wing or Right Wing ‘State Messiah’ is not the answer but a turning back to Divine/Natural Law and the Constitution is. While the Constitution was designed to restrain using Federal power to intervene into social and economic causes, it allowed for much latitude at the state and municipal levels to experiment.
It is for our elected officials in Washington and at the state levels to protect the defined boundaries of Federal power in the Constitution but unfortunately come election time, there’s no ‘Special Interest’ money for that.
Tell us what you think?
Christopher M. Mahon, Editor
In Obama’s Soak-the-’Rich’ article in Cato Institute, the writer Daniel J. Mitchell says,
“Tax Hikes are Worse than the Fiscal Cliff
America actually will fall off two fiscal cliffs in January, but only one of them is bad. The good fiscal cliff is the so-called sequester, which is the inside-the-beltway term for automatic spending cuts. These aren’t really spending cuts, just reductions in the growth of spending. If the sequester takes place, total federal spending will climb by $2 trillion over the next 10 years instead of $2.1 trillion. But anything that restrains the growing burden of government spending is a good idea, so a small step is better than nothing.
The bad fiscal cliff is the automatic tax hike, which exists because the 2001 and 2003 tax cuts are scheduled to expire at the end of the year. This means higher tax rates for all taxpayers, as well as increased double taxation of dividends and capital gains.”
What many economists and politicians don’t recognize is that there is a difference between money saved or spent in the private sector versus the public sector and the ‘unintended consequences’ of behavioral changes by the individual and the marketplace as a result of public policies that increase taxes, create more regulations and which usually means tax avoidance and spending decisions that are short term and counterproductive.
Unfortunately, as government does with most ‘hard political decisions’, politicians in Washington after much saber rattling will compromise on the important decisions of redefining the role of the Federal government and making some significant spending cuts and policy changes in Defense, Social Security, Medicare and other entitlement programs that for the most part should be remanded back to the states. Instead there will be a mirage of spending decreases from the baseline budget as mentioned earlier and there will be a phase out of tax deductions at an income level of $250,000 or so, which like the AMT was never bracketed or indexed and eventually inflated its way into the ‘Middle Class’ where most of the money is. As a result the market response will be to hide more income and investment strategies that moves more capital into the ‘shadow economy’ and overseas.
This past week in a ‘Farewell to Congress’ retiring Rep. Ron Paul took some time to reflect on his 40 year contribution to raising a warning of abusive federal power, “Dependence on our government is the worst it has been in US history..Why does the changing of parties and politicians not change policies, could it be that both parties are essentially the same?..Real Patriotism is challenging the government (and your party) when it’s wrong.”
While we appreciate past generations like those who grew up during the Great Depression and fought in WW2 and Tom Brokaw nicknamed the ‘Greatest Generation’. With deference to that generation, I believe the Greatest Generation is ahead of us, growing up before our eyes, rejecting today’s Historicism being taught of our past and embracing instead the original underpinnings of Individual Liberty that were forged in the US Constitution and which sailed a great Republic.
Hip Hip Hurrah for Elections and Representation! The Status quo won again and as Rep. Ron Paul slips out of public office, will there be a GOP or Democrat party that realigns itself to the Constitution and will there be new voices crying in the wilderness, “This is the way to Liberty, Walk Ye in it!” or are we inevitably headed down the slippery slope of more centralized government?
Christopher M. Mahon, Editor
While the GOP licks it wounds and some flee what they perceive as a ‘sinking ship’, the son of the ‘Father of NeoConservatism’ (Irving Kristol), Bill Kristol says on FoxNews Sunday November 11, 2012:
“The leadership in the Republican Party and the leadership in the conservative movement has to pull back, let people float new ideas…Let’s have a serious debate. Don’t scream and yell when one person says, ‘You know what? It won’t kill the country if we raise taxes a little bit on millionaires.’ It really won’t, I don’t think…I don’t really understand why Republicans don’t take Obama’s offer to freeze taxes for everyone below $250,000 — make it $500,000, make it a million…Really? The Republican Party is going to fall on its sword to defend a bunch of millionaires, half of whom voted Democratic and half of them live in Hollywood?”
While holding the line on taxes by the GOP might be a Pyrrhic victory at best, Kristol’s and other Conservative’s budging on tax policy (increasing) but giving no leeway on social and foreign policy issues belies a much larger problem. Punting on tax policy keeps the ball on the field of big government (federal), while giving up social policies to the states and shrinking US foreign policy engagements and footprint loses the ball from Washington and federal central planning as the canvass.
The history of the GOP is that of having it’s origins in the Progressive movement and it’s nature is to believe in ‘big government’. So while they Mea culpa on increasing taxes which is big government, it still keeps the federal government ball in play; while the GOP leadership resist inevitable changes in social and foreign policies, as states ratify marijuana and marriage laws and the public and US monetary conditions scream for changes in foreign policy. More taxes stays within the auspices of federal power, while decreases in military engagements and on social issues decrease federal power.
The Conservative and Progressive movements today are twin sons of different mothers. Birthed in the late nineteenth century postbellum and with different ‘step dads’ of both parties (in and out of office) siring along the way. The real question and the true sign of GOP capitulation is whether RNC Washington leadership is willing to discuss the purpose and limits of federal power going forward and welcoming Constitutionalists, Libertarians and Classical Conservatives in the vein of Edmund Burke to the table, who believe strongly in the individual and the free market to regulate not only economic values but social values as well.
In Federalist Papers, 10, 39 and 51 Madison eloquently expressed the limited powers of the federal government and the sovereignty of the states. Madison also gave instruction that while factions (special interests) could be dangerous to Individual Liberties, that in a competitive market both private and public (between the states) it allowed for the best ideas and solutions to step forward, failures to be isolated with it’s resources best reallocated and for ‘bad actors’ to be marginalized.
The question today might be asked by John Kennedy’s favorite poet Robert Frost in the 1920 classic ‘The Road Not Taken’,
“Two roads diverged in a wood, and I— I took the one less traveled by, And that has made all the difference.”
The road of ‘Limited, decentralized and constitutional government’ which protected Liberty rather than creating Utopian outcomes was more traveled earlier in US history but the path is today overgrown and distrusted by most in power and in the Universities; can party leadership turn with courage and determination down this path once again? Is there a post-Tea Party Movement waiting in the wings instead?
Please, tell us what you think.
Christopher M. Mahon, Editor
In Sunday’s NY Times column, Modesty and Audacity, David Brooks writes, “Washington is full of arrogant people who grab power whenever they get the chance. But there is at least one modest minimalist in town, and that’s John Roberts Jr.” Brooks of course is referring to the 5-4 (or 4-1-4) ruling of SCOTUS last week that produced a surprise ruling in some respects and some interesting tea leaf reading days later.
Brooks goes on further to frame what he and most in Washington believes is the game, “And here’s the biggest gift that Roberts gave to the nation: By restraining the power of the court to shape health care policy, he opened up space for the rest of us to shape that policy through the political process. By modestly refraining from rewriting health care laws himself, he has given voters and politicians more room to be audacious.” Does that sound dangerous to you? How much of your life do you wish to depend upon politicians to ‘manage’ and activities to exclude?
While it could be argued on both sides of the Health Care debate that they won a victory in the Roberts decision, on the one hand health care goes through but on the other there’s been a potential boundary drawn around the Commerce Clause which has taken on a power of it’s own since the Hughes court of the 1930s (Charles Hughes, Chief Justice, like Roberts nominated by a Republican, Hoover). But ‘at the end of the day’ (hate that saying) it still leans toward a pro-government interventionist game that doesn’t open the gate as much to non-politicians and lawyers and leaves the individual at the mercy of all branches of the federal government.
In Brooks’ summary he says, “Personally, I think the Republicans’ defined-contribution approach is compelling. It’s a potentially effective way to expand coverage while aligning incentives so that people make cost-conscious, responsible decisions. But the truth is neither I nor anybody else really knows what works. We’re going to have to go through a process of discovery. We’re going to have to ride the period of rapid innovation that is now under way.” While admitting the efficiency of aligning cost to benefits, in the article he doesn’t recognize the most efficient way that can be done and is done through competitive markets, without having to compromise the greatest attribute and foundation of this ‘Nation/Federalist’ system and that is the Freedom of the Individual and the Market to arrive at what Man cannot ‘Manage’ his/her way to.
Brooks even admits at the end of this statement “But the truth is neither I nor anybody else really knows what works.” So with that statement being true, then why would we take the further irrational steps of limiting personal choice, taking non-homogeneous data (individuals are so different), and from 40,000 feet in the air (DC) make decisions by an elite-ignorant (admitted by Brooks) group in Washington to create policy and manage costs, benefits and features?
If Presidential nominee Mitt Romney and his camp could step away from the ‘GOP handlers’ they would realize that as the smoke clears there’s ground to be staked out or it will be staked out for him. You see he was right in his Federalism but possibly wrong in his policy choice for Massachusetts. He is right in that the US Constitution and Madison specifically emphasizes the importance of leaving Positive Liberty (Government managed outcomes) and powers not enumerated in the Constitution to the states – it can’t be emphasized enough how important that is. He might be wrong as time will show in who stays, flees or goes to MA in part due to their health care system and whether it will crumble under the weight of its debt or survive.
Of course that is the power of the Market, that while as Brooks says ‘Nobody really knows what works’, with a federal government that protects open access into the market and quells disputes between states (not intrastate) it allows for the ‘friction’ of voluntary exchange and association which will in the long run provide access to better health care choices and lead to the ‘Greater Good’ of Liberty which is defined ‘on the ground’ and can be arguably protected in Washington if as Franklin said, “..a Republic, if you can keep it!”
The Iowa Caucus is less than a week away and political rhetoric by all candidates is at a high level, a good part of that is directed at Ron Paul who currently is the leader as indicated from most polls. He not only pulls from Independent and Libertarian voters but also Conservatives who have become disenfranchised with almost 10 years of military conflict at the expense of a balanced budget and debt. The latest accusations portray Congressman Paul as not only out of the `mainstream’ in his ideas on federal powers (even though by all accounts they are constitutional) but also that a Ron Paul presidency would be dangerous for the US as Iran could go nuclear and Paul is an `Isolationist’.
In a November 2011 Cato Institute article Ted Galen Carpenter makes the opposite claim that Military Interventionists and NeoCons like Gingrich, Santorum and Bachmann do us much more harm than good. For interventionists to not realize the beneficiary of a war with Iraq was Iran was a failure….“For neoconservatves to argue that the withdrawal of the few thousand remaining U.S. troops from Iraq significantly worsens that aspect is either obtuse or disingenuous. If they didn’t want Iran t…o gain significant influence in the region, they should have thought of that danger in 2002 and early 2003, instead of lobbying feverishly for U.S. military intervention against Iraq. The United States has paid a terrible cost — some $850 billion and more than 4,400 dead American soldiers — to make Iran the most influential power in Iraq.”
In another article by Per Bylund, Bylund makes the case how the `Endowment Effect’ theory, (people place more value on things they own versus things they do not) illustrates the shortcomings of economic and military intervention in not understanding human action (Praxeology) and the unintended consequences. Or why Ron Paul’s theories on domestic and foreign policies while more aligned to constitutional principles are also more sound than policies of the other candidates.
Does US military policy of Intervention into the affairs of other nations (occupation, embargo, etc), prop up the dictators of the world like Hugo Chavez or Mahmoud Ahmadinejad who rally their people and crusade against US military might and US monetary policy? What part did Federal Reserve Quantitative Easing (1 and 2) play in the Middle East uprisings and other struggling nation’s financial affairs? What part did troops in Iraq, Afghanistan and Pakistan play? Tell us what you think?
Christopher M. Mahon, Editor
While new home sales took an ‘unexpected’ drop of 12.6% in January, the jobs report showed promise as new jobless claims dipped below the 400,000 level. But does the jobless number really reflect what is happening in the jobs market? We know that individuals who can’t find employment after a ‘reasonable’ amount of time give up looking and might rotate in and out of jobless numbers, but is there an unregulated, unstructured ‘jobs market’ that is unaccounted for?
In a December 2009 article by Cato Institute’s Richard Rahn,’New Underground Economy’ lays out the characteristics of how underground economies ebb and flow. He starts out, “Here is the evidence. The Federal Deposit Insurance Corp. (FDIC) released a report last week concluding that 7.7 percent of U.S. households, containing at least 17 million adults, are unbanked (i.e. those who do not have bank accounts), and an “estimated 17.9 percent of U.S. households, roughly 21 million, are underbanked” (i.e., those who rely heavily on nonbank institutions, such as check cashing and money transmitting services). As an economy becomes richer and incomes rise, the normal expectation is that the proportion of the unbanked population falls and does not rise as is now happening in the United States.”
Rahn, in his article goes on to say that the underground economy is affected by federal and state tax, regulatory policies and inflation. When Sarbanes-Oxley was implemented in 2003 as a reaction to companies like Enron who didn’t account for off balance sheet liabilities in their reporting, it had the unintended consequences of building huge costs for large and mid-size companies to come into compliance. Most complied but some started to move headquarters out of US. Even today, while new start ups have slowed due to economic environment, there’s an increasing ratio of new companies starting up in Europe or Asia.
The smaller US businessowner has different alternatives than mid-size and large companies that are more public, they can simply take their business offline or underground.The trades and some services are more likely to go ‘offline’ to avoid heavy local, state and federal taxes which can eat up substantial profits and add time consuming additional recordkeeping and compliance. Carpenters, painters, lawn maintenance, home cleaning and many other small businesses who reported income for years are taking risks by pulling if not all their business, a good part out of the above ground economy. This is reflected in January 2011 federal tax revenues which are up from the previous year. “Total government revenues rose by $21.4 billion for the month (Jan 2011) from a year ago to $226.6 billion, a 10.4% increase. Year to date, revenues are up by $65.4 billion to $758.4 billion or by 9.4%. Total outlays for the month though increased by $28.4 billion or by 11.5%. Fiscal year to date, spending is up by $53.4 billion, or by 4.8%” Dirk Van Dijk, CFA ‘Federal Red Ink Less Than Expected.
When you look closer at federal revenue for January however, you see that payroll revenue is down even when factoring in the lowered employee tax rate by 2% (6.4 to 4.4), which only took affect in January and that the increase had more to do with liquidation of qualified money out of IRAs and 401(k)s, profit taking and asset repositioning as the estate tax issue wasn’t settled until year end.
In the trades like Carpentry, an owner might take his full business underground and work for cash without reporting or he may take his labor offline by hiring help that they pay in cash. The worker takes the risk of not entering social security and of possibly not building his credit profile and the employer takes the risk on an unlikely audit or insurance claim if payroll not accounted for. These are risks that are considered either consciously or unconsciously everyday as the cost of business continues to rise.
The budget battles happening in Washington and in the states like Wisconsin and now breaking out in other states like IL, OH and NJ is of particular interest to businessowners who hope for spending cuts but weigh the advantages and disadvantages of moving out of states or the country for larger companies and for small business owners, cutting another employee or taking their business underground.
In a controversial study by Carmen Reinhart and Ken Rogoff it shows that economic activity is hindered when government gross debt rises above 90%. This year actual debt held by the public is 72% but is expected to accelerated as social security and health care liabilities are projected to rise sharply.
The budget the President is handing to Congress is expected to be $3.73 trillion, with only a few weeks left to deliberate, a government shutdown is becoming more of a possibility. There is also the need over the next few months of an additional increase in the debt ceiling which will cause a confrontation within Congress between the Tea Party sponsored members who took pledges not to raise the ceiling and those who are more pragmatic or have sponsored bills in legislation.
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When the President went early Christmas shopping to Mumbai and Seoul, he wasn’t shopping for everyone, only his favorites.
GE, Boeing, GM (Chrysler and the unions), Harley Davidson to name a few, were taken on a trip to pick out there presents this year. Big trading deals worth upwards of $10 billion was negotiated in the Mumbai trip and a multi-billion dollar deal while not signed in Seoul is ‘still on the table’.
So where’s the deal for you and I and the mainstreet businessowners we know? Isn’t both political parties’ philosophy, “if ‘big business’ is taken care of by ‘big government’ then everyone is better off”, right? It’s kind of that ‘tricke down’ theory that many progressives use to rail against during the Reagan years. The government targets tax cuts, spending stimulus or negotiates ‘juicy’ trade deals with other nations and everyone is happy. Or are we?
When trading partnerships are negotiated with other countries, each government represents ‘interests’ within their own countries. Specifically in the US, groups that benefit tend to enjoy it at the exclusion or detriment of others. Our Civil War, while partly fought over slavery, was also over conflicting interests within industries in the north and manufacturers in the south over tariffs and import/export trade.
US trade deals tend to favor large corporate interests in general and the special interests of the party in power. President Obama favors union dominated industries, while the GOP favors Defense deals for contractors and weapons manufacturers, but the economic dynamics of government intervention affects us all.
When companies and industries are subsidized through `favored’ economic policies, it allows for less competitive market forces and unresponsive corporate management to domestic markets indirectly as well. In addition, where competitive markets force companies to change or fail, these same companies insulated through artificial demand can forestall those changes until we have a national crisis as in banking, auto and even housing, which through FannieMae and FreddieMac and overseas investments, distorted demand and changed cost structures.
Unlike other federal policies like Education, Welfare and Retirement, the federal government has a constitutional role in foreign trade but it is not in cutting trade deals that favor corporations or industries over others or subsidizing markets with taxpayer money but rather in regulating the transfer of goods (commerce) between our businesses and other foreign entities – which is the feds only role regarding inter-state commerce as well. There are two competing philosophies of government: Negative vs Positive Liberty which is important that our nation gets a handle on. In our series ‘Constitutional Liberty’ we address that.
Walmart, which keeps an annual review of its pricing has noticed an uptrend of about 4% annually, Bank of England just announced that it is expecting their inflation projections for 2010 to be higher too, around 3.5% and that their downward projection of inflation estimate for 2011 of 2% would be taken off the table for now. As world gold prices and commodities prices in general start to move up, what can we expect going forward regarding prices in general and exchange rates between nations? Also, while lawmakers seem to think they can control inflation movements with monetary policy manipulation, history has shown a different result. There are variables (consumer/business behavior and new international currency dynamics) that aren’t represented in monetary models.
As seen in the G20 meetings this past week, and nations in general around the world, we are starting to see upward pressure on prices, partly as a result of spotty increases in demand but mostly due to currency devaluation. Governments have incentives to keep currency values low in order to be competitive in export markets and for Governments carrying debt they are able to monetarize it. Unfortunately, with the interconnected world economy we live in this creates friction and retaliation by competing currencies.